Our national debt is on an unsustainable path.
Recently, our debt reached another landmark number. $25 trillion. Certainly, a number of that magnitude may sound alarming to most citizens; but it may be more shocking that 20 days later we were already more than halfway to $26 trillion.
I understand that our nation is currently experiencing a global pandemic and we are doing whatever it takes to keep families and businesses financially stable until we can safely get back to work. This article is not meant to ridicule our government for its spending but rather inform the public of the undeniable truth. You may be asking how these numbers can affect your future, and I can assure you that staying on our current path will negatively affect every US citizen. However, there are some strategies that individuals can implement in order to protect themselves from our country’s uncertain future.
According to the Congressional Budget Office, we were projected to have a federal budget deficit of $1 trillion in 2020 and an average of $1.3 trillion for the rest of the decade. However, as of June 1st of this year, our deficit has already surpassed $3 trillion. Not to mention, if the government passes a second stimulus package then it will surely double our current deficit.
Rising national debt can affect us in many ways. I think most importantly, since it is at the forefront of most of our current thoughts, more debt gives us less flexibility to respond to future crises such as the one we are facing today. The more liabilities we have the less money we have as a nation to invest in our future. This can affect priority areas like education, research and development, and infrastructure. Lastly, our unsustainable fiscal path can make essential programs like Social Security vulnerable if the government does not have sufficient funds.
Our debt must be paid back with tax revenue and the sooner we act the easier the path will be. When asked about the current spending of the federal reserve in an interview with 60 minutes, chairman Jerome Powell said, “that’s something we are going to have to deal with” and “it’s time to get on a sustainable fiscal path.”
It is safe to say that tax rates are going to rise in the future in order to help fund our national debt. By how much, nobody knows for sure, but many experts believe they will have to double. Most Americans have the majority of their retirement savings in tax deferred accounts such as a traditional IRA or 401K. With tax rates inevitably rising, now is the time to protect what you have worked so hard to save. By shifting your assets into tax free investment vehicles, you can receive more income in retirement, increase the longevity of your cash flow, and provide certainty about your future and the legacy you leave behind for beneficiaries.
If you want more information on how to protect yourself from our national debt crisis and rising tax rates, contact me at email@example.com or The AFI Group directly.